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Goods Issue to Subcontractor at MAP or Price of Purchase which ever is high

Dear Sir/Madam,

The scenario is like this :

I have raised a Purchase Order for a material (say ABC) to be kept in stock and to be issued as and when requisitioned by the user.

Quantity of PO 100 nos. Unit Price : Rs. 10 per no. and Total Price of PO = Rs. 1000/-.

I prepare a Goods Receipt for these 100 nos. hence GR value will be Rs. 1000/-.

Stock will be 100 nos. and the Moving Average Price will be Rs. 10/- and Value of Total Stock will be Rs. 1000/-.

I have prepared another PO for a material (say ABC).

Quantity of PO 100 nos. Unit Price : Rs. 8/- per no. and Total Price of PO = Rs. 800/-.

Goods Receipt is prepared for these 100 nos., hence GR value will be Rs. 800/-.

Stock will be (100 nos. + 100 nos.) = 200 nos., Value of Total Stock will be (Rs. 1000/- + Rs. 800/- = Rs. 1800/-) and the Moving Average Price per unit will be Rs. 1800 / 200 = Rs. 9/-.

I have to issue the material to the Sub-contractor for executing a particular job.

The requirement is to issue the material to subcontract at the highest price (i.e. Rs. 10 per unit) instead of issue of Material at the Moving Average Price (i.e. Rs. 9/-). This is required to ensure that the contractor does not report loss of materials in order to avail benefit of difference in market price and price at which the company issues material to the contract (i.e. the contract the may sell the material at a cost of Rs. 10 per unit and repay the issuing company Rs. 9/- per unit (MAP at which the material is issued to him).

This requirement is audit point and has come as an audit compliance for us.

The problem is my Stock Value is Rs. 1900/- so I can book a consumption of only Rs. 1900/-, but if I am able to issue goods of Rs. 2000/- where will be a negative consumption of Rs. 100/-.

Please suggest if it is possible and if possible advisable and what should be the accounting entries that will be posted and to make goods issues at market price or price which is higher in the SAP. How can this be achieved.

Thanks in advance.

AJ

Former Member
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